Arthur J. Villasanta – Fourth Estate Contributor
Washington, DC, United States (4E) – Federal Reserve Chairman Jerome Powell expressed extreme worry about the burgeoning U.S. debt along with the overall budget deficit.
The annual debt in 2018 exceeded $1 trillion and is balooning every minute of everyday. On the other hand, the overall deficit hit $21.9 trillion as of January 8, said the Department of the Treasury. Of this massive amount, $16 trillion is owed by the public.
“I’m very worried about it,” said Powell about the national debt during a meeting of The Economic Club of Washington, DC yesterday. “From the Fed’s standpoint, we’re really looking at a business cycle length: that’s our frame of reference.”
“The long-run fiscal, non-sustainability of the U.S. federal government isn’t really something that plays into the medium term that is relevant for our policy decisions,” according to Powell. “It’s a long-run issue that we definitely need to face, and ultimately, will have no choice but to face.”
While the U.S. has had sustained annual debts higher than 2018’s, the debts in 2009 and 2010 occurred when the economy was recovering from the Great Recession of 2008. Currently, the annual national debt is growing despite a strong economy.
Part of the reason for the rising deficit, was the first year of President Donald Trump’s tax bill. Tax revenue today is nearly flat while government spending has risen with the bipartisan budget bill. And because of the corporate tax cuts in the Republican’s Tax Cuts and Jobs Act, corporate tax receipts fell 30 percent.
All these are largely the result of Trump’s unwise tax cut.
“So what we’re seeing — you would expect at a time like this revenues rising faster than spending, because the economy is strong, more people working, paying taxes, fewer people collecting unemployment benefits and such, and the deficit would shrink,” said David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution.
“We see the opposite, and that’s largely because of the tax cut.”
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